Charlie Baker at HealthCareBlog provides a critique of the Massachusetts health reform plan and whether it will serve as a model for the rest of the nation. He writes about whether Massachusetts can serve as a model when there are quite a few differences between health insurance there and elsewhere. His article states,

. . . . There were
profound differences between Massachusetts and the rest of the country
before health care reform took center stage here that make relying on
our experience somewhat challenging for the nation as a whole. For
example, Massachusetts already had guaranteed-issue requirements for
individual health insurance coverage even before reform. Today, most
states don’t. So in Massachusetts, individual coverage was available
to anyone who wanted to buy it, but it was really, really expensive.

That’s because most of the people who buy individual coverage -- absent
a mandate to purchase -- usually plan to use health care services once
they purchase the insurance. Insurance works through risk pooling - a
small number of people who get sick spend the premiums paid by a much
larger group of people who don’t. If most of the people who buy the
product plan to use it, there’s not enough healthy people to keep the
overall price down.

When the state merged the individual health insurance market with
the small group health insurance market (businesses with
1-50 employees) as part of its reform efforts, prices for
individual coverage went down by 25 percent (on a per capita basis,
individuals spend a lot more on health care than small business
employees - hence the big drop in price for the individuals when they
got mushed together with all the small business employees). At the
same time, small group prices went up by 2 percent to pay for including
the cost of all those individual purchasers in their risk pool. This
was mostly missed during the implementation of reform, because medical
expense trends went up by 10% over the same period of time, shielding
the shift in expenses from individuals to small group.

In addition, most other states permit medically
underwritten individual insurance - which weeds out people seeking to
purchase coverage who might be high risk enrollees. They either get
denied coverage, or shifted to a high risk pool for high risk
enrollees. As a result, individual insurance in many states is very,
very inexpensive for those who can access and purchase coverage. Any
national move to guarantee issue individual coverage - even with a
mandate to buy - virtually assures that these people - and there are
millions of them throughout the country - will pay a lot more for their
health insurance coverage than they pay now. This is exactly the
opposite of what happened when reform was passed in Massachusetts, and
needless to say, this would make all those folks who have individual
insurance now very unhappy.

Massachusetts also heavily regulated the small group health
insurance market before reform, using rating rules that capped how far
apart the prices for expensive and inexpensive (relatively speaking)
products could be, and prohibiting medical underwriting in the small
group market. Today, most states allow significantly more flexibility
than MA did before reform, and the MA rules today are even more
restrictive than they were before reform. . . .

Third, Massachusetts had a declining population, a tight labor
market, high per capita income, and relatively rich plan designs in its
public and private health insurance programs to begin with. Our
unemployment rate has been below the national average for the past
couple of years, but not because we’ve been creating new jobs faster
than the nation overall. It’s because our working population has been
shrinking for years, making it easier for the state’s economy to appear
to be relatively healthy compared to its peers. . .

Fourth, state government was already making significant - and
calculable - investments in paying for hospital-based services provided
to people in Massachusetts who did not have insurance. It was worth
about $1 billion, and was funded by a combination of assessments on
health plans and providers, money from the state itself, and federal
reimbursements through a Medicaid waiver. There is no calculation
anywhere at the national level that could possibly help people
understand what the “savings” from getting everyone covered might be to
the system overall. Moreover, because Massachusetts already had so
much money “in the game” so to speak, the Commonwealth did not have to
raise taxes (much) to make the prospect of universal coverage
a reality. I would think this trick will be much harder to pull off at
the federal level.

Fifth, Massachusetts raised Medicaid payments to hospitals and
physicians as part of the reform initiative by a lot - $270 MM over
three years. That’s a 3 to 5 percent increase on top of regular inflation, plus
or minus. Duplicating this kind of positive incentive to support
reform among providers at the federal level will be hard to do.

Finally, the health care cost problem wasn’t addressed by the MA health care reform plan. In fact, a recent post on the Health Care For All blog argues
that the decision to ignore the cost question made reform
possible. "The main critique is that the (reform) plan over-regulates
and does not do enough to control spending. One of the lessons we drew
from Massachusetts health reform is that coverage expansions, as hard
as they are, are easier than serious cost control. Massachusetts
wisely decided not to hold coverage hostage to the difficult decisions
about cost. In fact, expanding coverage increases the pressure to do
something about costs, pressure that wouldn’t exist without the
expansion."

It’s also worth noting that Massachusetts enacted almost $800 MM in
new taxes as part of its FY 2009 budget to fund, among other things,
the third year of health care reform. This has not been a free ride
financially, and won’t be going forward. In addition, the financial
meltdown of the past three months only makes the state’s fiscal
situation worse.

The article continues with some suggestions for a federal health reform initiative.